"But in supporting the median, Microsoft lost the frontier. The modern productivity stack fills the gap of Microsoft Excel’s stalled innovation."

"Microsoft’s products are ubiquitous in the Fortune 5000, but conspicuously absent in two growing segments: 1) young users, and 2) growing tech companies."

"Microsoft was too profitable to raise real VC money, so the founders owned 70% at IPO."

"But Bill Gates and Paul Allen disagreed. As hardware rapidly improved, Gates and Allen realized that the bigger opportunity was not in building the next computer kit, but in building software to make these hobbyist devices accessible to a mass audience."

"They founded Microsoft that year with the founding mission of putting a computer in every home"

"2000s: diversification is for losers"

"In 1999, Microsoft was worth $620B, making it the most valuable company in the world."

"In the 2000s, Bill Gates’ successors took his mission to put a computer in every home too literally, expanding the Windows empire indiscriminately in every direction."

"But diversification was not damning in itself, it was a symptom of a bigger problem: Microsoft’s growth was indexed to the wrong trend."

"Without a clear growth driver, Microsoft went on the defensive against the rest of FAMGA in the late 2000s: Bing, Skype, Surface, and Windows Phone were reactive moves."

"But Microsoft has deep enterprise distribution and trust, something the other FAMGA members do not."

"Those advantages positioned Microsoft to capture the next wave: cloud infrastructure."

"Guided by the Windows-everywhere dream, Ozzie pitched Azure as “Windows in the Cloud”, or a cloud computing operating system."

"But what customers actually wanted was an easy-to-use virtual machine in the cloud that Amazon’s EC2 delivered."

"But unlike Amazon, Microsoft already had enterprise distribution."

"Once Microsoft started including Azure credits and consumption in its existing enterprise deals, the business took off."

"Today, Azure is a monster with over $30b in revenue, and several $100m+ TCV deals in the Fortune 100."

"AWS has 30% operating margins, driving the majority of Amazon’s net income."

"Azure puts the fastest growing software companies of the past 25 years to shame:"

"The extraordinary growth of cloud infra businesses wasn’t tracked closely because 1) the key players weren’t venture backed or even standalone companies"

"2) GCP, AWS, Azure were all highly secretive about their early growth, lumping it into “other” revenue buckets to sandbag the breathtaking growth of the segment."

"While AWS remains the market leader, it has maintained a flat ⅓ of cloud market share, whereas Microsoft doubled since 2017 and is growing faster than both AWS and GCP."

"It matters that you rode the growth wave of the cloud."

"The MBA case study narrative gives Satya Nadella credit for reinventing Microsoft via Azure, particularly after the lackluster years under Steve Ballmer."

"A better framework to understand Microsoft’s leadership is the Roman Empire."

"Undoubtedly, Nadella has been an exceptional CEO."

"He is highly attuned to culture: his superpower was transforming Microsoft from a culture of “no” into a culture of “yes”. By unblocking execs across divisions, Microsoft reaccelerated by the late 2010s, from single digit revenue growth rates to high teens today."

"While philanthropist Gates is in favor, business Gates has been out of favor since his notorious antitrust loss in 2000, United States vs. Microsoft Corp, when he got whacked for bundling Internet Explorer with Windows."

"With the right strategy and execution, Microsoft can become the first $10T company."

"First, I would take stock of its relative strengths: $130B in cash. $2.3T of market cap."

"Microsoft has powerful intangible assets. Relative to the rest of FAMGA, it may be the only player with some antitrust immunity."

"This is somewhat structural: software markets are less monopolistic than consumer internet."

"It is no surprise that Microsoft started aggressively ramping share buybacks in 2014, the year Nadella took over as CEO."

"We can’t do justice to the entirety of Microsoft’s product suite in 4,000 words, but on the path to $10 trillion, we can explore four new waves Microsoft can ride: demographics, data, developers, and depth."

"Microsoft failed to capture the self-serve motion that unlocked younger demographics and propelled many productivity decacorns in the past five years."

"By acquiring companies with complementary demographics, Microsoft can recapture these segments."

"Notion: To oversimplify Notion to its demographics, it is Office 365 for people below age 35."

"Miro: This could represent an entirely new Office suite product line – digital whiteboarding"

"Acquiring these companies would capture the young productivity tool users that Microsoft needs to make Office successful in the 2020s."

"n other words, there are relatively few young people in charge of things at Microsoft. Empowering the new guard can help its products flourish with Millennials and Gen Z."

"Nadella claimed that “Microsoft ❤️  Linux” in 2015, acquired GitHub in 2018 in a splashy $7.5B acquisition, and Azure has deep Linux support (half of Azure workloads run on Linux)."

"In other words, Azure needs organic adoption to fully penetrate the enterprise."

"Owning the developer experience at the IDE or Terminal is the path to cross-sell cloud infrastructure downstream."

"Microsoft has many pieces that can theoretically support the modern data analyst – data warehousing through Synapse, data pipelining through Data Factory, visualization through PowerBI."

"Microsoft should pay up for best-in-class companies to make up for lost time in winning the business data race"

"Fivetran as the best-in-class E and L, and dbt as the corresponding T. This kills three birds with one stone: position Microsoft to win data pipelining with a leading product suite, inherit distribution to tens of thousands of the best data teams, and push them towards Azure."

"For one, Microsoft is one of the best-positioned companies to compete with Salesforce. Microsoft’s CRM product Dynamics is a sliver of what it could be."

"If Microsoft convinces customers to store their customer data in an Azure warehouse (enriched by LinkedIn’s data) instead of a CRM, then the CRM becomes a simple window through which companies access customer data."

"Each incremental product benefits from Microsoft’s distribution, so double-digit market share in these categories is nearly guaranteed."

"Microsoft is playing catch up in most markets, so internal product development alone is not enough – it must be complemented by M&A."

"DocuSign: E-signatures are one of the most obvious secular trends in software, and DocuSign is the clear leader."

"Figma: Surprisingly, Microsoft has no answer to Adobe, despite being the largest SaaS company in the world. Figma captures both the demographics and depth opportunities."

"Zoom: Microsoft has Teams video calling, but Zoom has network effects and became the standard first among young users."

"Now Microsoft is the largest US gaming company – better for the US to own our gaming future instead of China. Gaming is seemingly distinct from its enterprise advantage, but Microsoft is a conglomerate."

"How much can Google really do to grow market share? It already won search. Microsoft has many growth levers to pull."

"Becoming the first $10T company will require aggressive M&A and product development across categories, and some pride-swallowing to compete directly in emerging software markets. Microsoft has the capital, talent, and distribution to pull it off."

"But the re-acceleration of the company in the 2010s and the path to $10T tell us about the power of S-curves, compound products, M&A, and second-mover advantages."

"PC sales were decelerating, while Microsoft was betting on their growth. Reorienting the company towards the growth of cloud infrastructure and business software (which Ballmer should get some credit for) gave Microsoft life again."

"Great product theses and fast-growing categories are increasingly the true bottleneck."

"As the surface area of new software markets plateaus, tech will transition towards a consolidation era. Startup M&A will become a core part of growth – think of the rollup eras for oil, telecom, and cable."

"In the 2010s, unbundling made sense because software adoption outpaced the ability for unified product companies like Microsoft to build software."

"The classic consideration for VCs is whether incumbents can copy the startup’s technology before the startup copies the incumbents' distribution. For the past 20 years, the answer was almost always no"

"there is a real bundling effect in software"

"Microsoft already has distribution into every Fortune 1000 IT department. This makes it much easier to sell new products than from a cold start."

"Marc Benioff already understands this deeply: Salesforce has more revenue today in customer service than in its core sales CRM product, and is now tackling marketing and analytics."

"if you have lower CAC on selling incremental products to your existing customer base, it is advantageous to build a deep product suite before selling horizontally."

"Consumption-based pricing is the business model that is most aligned with customers."

"Unsurprisingly, many of the fastest growing companies have some version of consumption-based pricing: AWS, Azure, GCP, Snowflake, Twilio, Scale."

"Consumption-based pricing is the best way to bet on the quality of your own product: it perfectly aligns product, customer success, and sales. If customers are engaging with your product, it is a win-win."

"The tech industry doesn’t talk about capital as a moat, probably because it benefits those that have already made it."

"In recent startup history, massive capital scale often has failed to change the trajectory of companies: think of the SoftBank mega-rounds that went sideways. Even in the case of Uber, a relatively good company with economies of scale, capital hardly helped"

"Azure and AWS are two of the most successful megaprojects of this century, but were hidden from the public for years, nested inside much larger corporations."

"It was the Windows company in the 2000s, became the Office company in the 2010s, and is becoming the cloud company in the 2020s. It is the sum of its core advantages: enterprise distribution, user trust, and an engineering talent vortex."

"Azure alone has a path to hundreds of billions in revenue, and would be one of the largest standalone companies in the world today. Getting to $1T in revenue will require ruthless expansion across product and M&A in every software market."